Truth, Inspiration, Hope.

Crypto Users Lose More Than $8 Billion to Scams and Hacks in 2021

Neil Campbell
Neil lives in Canada and writes about society and politics.
Published: December 21, 2021
Users in the cryptocurrency community lost more than $8 billion in 2021 alone to scams and hacks, according to media and analytics firms.
Taken during the DCentral Miami Conference at the Miami Airport Convention Centre on November 30, 2021 in Miami, Florida. Although cryptocurrency is a technology built on cryptography, its decentralized, Internet-only characteristics left users who fell for scams and traded on hacked exchanges with more than $8 billion in concrete losses in 2021 alone with no recourse. (Image: Joe Raedle/Getty Images)

Although cryptocurrency holders and enthusiasts alike may tout the technology as the future of international finance, its characteristics as cross-border, decentralized, Internet money leave users vulnerable to security flaws not seen in physical assets or fiat currencies managed by national banking systems.

Such flaws have resulted in more than $8 billion worth of digital currency being lost to scams and exchange hacks in 2021 alone, according to reports. 

The bulk of the figure comes from a Dec. 16 sales piece by blockchain analytics firm Chainalysis, which found users lost $7.7 billion to scams this year. The figure was up from under $5 billion in 2020, but still below the all time high of almost $10 billion hustled away from the community in 2019.

The majority was composed of $5 billion lost by users to investment scams. Notably, Chainalysis said, “At the same time though, the number of deposits to scam addresses fell from just under 10.7 million to 4.1 million, which we can assume means there were fewer individual scam victims.”


“This also tells us that the average amount taken from each victim increased.”

The U.S. Federal Trade Commission (FTC) issued a warning on investment scams in May, only weeks after Bitcoin had posted an all-time high of approximately $65,000 USD, that the agency had received reports from more than 7,000 people who had fallen prey, losing over $80 million. 

The FTC said the average loss suffered was $1,900.

The bulletin explained, “Many people have reported being lured to websites that look like opportunities for investing in or mining cryptocurrencies, but are bogus. They often offer several investment tiers – the more you put in, the bigger the supposed return.” 

“Sites use fake testimonials and cryptocurrency jargon to appear credible, but promises of enormous, guaranteed returns are simply lies. These websites may even make it look like your investment is growing. But people report that, when they try to withdraw supposed profits, they are told to send even more crypto – and end up getting nothing back.”

Chainalysis found by analyzing crypto addresses connected to investment scams still receiving funds that the number of active scams had increased more than 50 percent from 2020 to 2021, arriving at a total of 3,300.

The firm also identified a new form of scam that they define as  “rug pulls.”

“As is the case with much of the emerging terminology in cryptocurrency, the definition of ‘rug pull’ isn’t set in stone,” explained Chainalysis. “But we generally use it to refer to cases in which developers build out what appear to be legitimate cryptocurrency projects — meaning they do more than simply set up wallets to receive cryptocurrency for, say, fraudulent investing opportunities — before taking investors’ money and disappearing.”

Rug pulls took almost $3 billion out of the pockets of users in 2021 “accounting for 37% of all cryptocurrency scam revenue in 2021, versus just 1% in 2020.”

The majority of that heartbreak was concentrated in $2.6 billion stolen on a centralized Turkish crypto exchange called Thodex, which one day in April suddenly halted trading, claiming the need  to investigate 30,000 suspicious accounts operating on the platform.

The exchange never resumed operations, and those who trusted Thodex with their money lost what was held.

Outside of rug pulls, the biggest hit to enthusiast’s wallets was the Russian ponzi (pyramid) scheme Finiko, which promised returns as high as 30 percent. Finiko amassed $1.5 billion from 800,000 separate deposits over the course of 19 months.

In July, The Moscow Times chronicled the story of one woman who, looking for a way to supplement her income after discovering she was now pregnant, was referred to Finiko by “a friend from work.”

The 31-year-old donated her savings of $5,000 USD to the cause, amounting to approximately a year of salary converted to Roubles, “Hoping she would be able to buy a flat by the time her baby arrived.”

“However, by the summer, Finiko had stopped paying any returns and she was no longer able to withdraw her investment. She realized she was one of hundreds of Russians who had been duped by the murky company,” said the article.

The woman told Moscow Times, “I didn’t think of myself as someone who would fall for a pyramid scheme…But here I am…I have a baby on the way and no money.”

A lack of rationality and discernment resulting in falling for scams isn’t the only critical vulnerability for crypto users. Many deposit funds to exchanges to trade, which are often unlicensed, unregulated, hosted in a country with lax law enforcement and oversight, and are themselves fly-by-night operations, only to lose their shirts when the service is hacked.

Dec. 17 reporting by NBC calculated that this year alone, more than 20 different hacks at cryptocurrency exchanges, resulting in losses $10 million or greater. 

Six such attacks stole at least $100 million.

NBC said that by comparison, the average bank robber made off with a meager $5,000 or less, according to FBI data.

“Despite the large dollar amounts associated with these thefts, they often lack the drama or attention of traditional bank robberies. But cryptocurrency experts say they offer a warning to would-be crypto investors: Exchanges are now lucrative targets for hackers,” read the article.